9 March 1990 Ministerial Letter 59308 F - Non-profit Organizations

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

March 9, 1990

Dear Sirs:

Re:  Non-Profit Organizations  (NPO's)

This is in reply to your letter of December 21, 1989 in which you request an opinion as to whether, under certain circumstances, an Ontario corporation incorporated under the Business Corporations Act, 1982 (Ontario) and regulations thereto (the "OBCA") would qualify as a tax exempt non-profit organization pursuant to clause 149(1)(1) of the Income Tax Act (the "Act").  We apologize for the delay in replying to your letter.

Traditionally, in your view, corporate non-profit organizations incorporated in Ontario are constituted by the issuance of Letters Patent under Part III of the Corporations Act (Ontario) (the "OCA") as corporations without share capital. However, you submit that the choice of statute under which a corporation is incorporated ought not, in and of itself, to determine the eligibility of a corporation to qualify for tax exempt status under clause 149(1)(1) of the Act.  In your opinion, Interpretation Bulletin IT-496 contemplates circumstances where an incorporated non-profit organization may have shareholders and may be incorporated by Articles of Incorporation, both of which terms are appropriate for corporations incorporated under the OBCA but are wholly inapplicable to corporations incorporated as non-share capital corporations under Part III of the OCA, which provides for members rather than shareholders and for Letters Patent as the charter document of incorporation rather than Articles of Incorporation.  You suggest that, with the appropriate qualifications and provisions contained in its Articles of Incorporation and by-laws, the conditions which must be complied with to qualify for tax-exempt status under clause 149(1)(1) of the Act, as enumerated in the Bulletin, can be met by a corporation incorporated under the OBCA.

Having stated the foregoing you then set out and comment on what you consider to be the four principal conditions which must be complied with by a non-profit organization, as set out in paragraph 2 of the IT-496 and the manner in which a particular corporation proposing to be incorporated under the OBCA may comply with these conditions.

Your comments would appear to be directed to the fact situation of a particular taxpayer and appear to relate to a proposed transaction or transactions.  In accordance with paragraph 23 of Information Circular 70-6R the Department does not issue written opinions concerning proposed transactions.  Should you in fact wish an advance income tax ruling relative to the fact situation set out in your letter, it will be necessary for you to conform to the guidelines under which such advance income tax ruling are issued, set out in IC 70-6R.

We do however, offer the following general comments.

Our Comments

1.     In our view an NPO may be a corporation incorporated under either the OCA or the OBCA providing it meets the conditions to be complied with under paragraph 149(1)(1) of the Act.

2.     A corporation that is organized and operated to educate professionals, children, young adults, parents and other interested persons on the recognition, prevention and treatment of addictive substance abuse in the manner outlined in paragraph (a) on page 2 of your letter would, in our view, have a charitable purpose.  Thus it would appear to fall clearly within the comments in paragraph 4 of IT-496 and would, when incorporated, be a charity.  This view has been confirmed on an informal basis with Mr. G. Murray, Director of our Charities Division.

In view of the foregoing and our comments with respect to proposed transactions and advance income tax rulings we are unable to comment further on this matter.  We do, however, suggest that you submit a request for registered charitable status to our Charities Division.  In the event, after their review, that your proposed incorporation of an entity dedicated to the dissemination of information relative to addictive substance abuse does not qualify as a registered charitable organization we would be pleased to consider a request for an advance income tax ruling with respect to the NPO status of such an entity.

We point out in closing that we are in general agreement with the comments in paragraphs (b), (c) and (d) of your letter relative to the conditions which must be complied with by a corporation wishing NPO status.

We trust our comments will be helpful.

Yours truly,

for Director Business and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch